Policy

VAT

ALVA remains concerned that the fall in the UK's market share is partly attributable to a fall in its price competitiveness relative to other countries. This we contend is to some degree due to the high levels of taxation.

We support the Government's overall stance that taxation where possible should be imposed on the end-user rather than through direct central taxation. However, we note that the impact of the VAT regime, combined with rising employment costs, further adds to the distortion and competitive pressures on the industry.

The EC 6th VAT Directive sets down as one of its goals the harmonisation of VAT rates across the European Union. When achieved this will decrease distortions within the EU's tourism markets and should encourage fairer competition. However, this goal will take time to achieve. In the meantime, the majority of member state governments have chosen to apply differing rates to tourism services.

The VAT rate applied to tourism services in the UK is one of the highest in the whole EU. Research by VisitBritain in the 1990s and more recently by the British Association of Leisure Parks, Piers and Attractions (BALPPA) has shown that European states with higher rates of VAT on visitor accommodation experience significantly slower growth in their international tourism receipts than those that levy a lower rate.

The UK's high rate disadvantages its tourism businesses relative to most of our EU competitors. ALVA calls for a VAT reduction on, in the first instance, tourist accommodation to help boost price competitiveness (assuming no changes in other EU destinations).